Today we start a series that goes into more detail that we usually include in this blog. Often we are asked about the propriety of a particular request from an auditor. Most of the time, we know and understand what the auditor is intending to accomplish by the request. Sometimes, the requests are a bit obscure. When it comes to audits of incurred costs, auditors must comply with Mandatory Annual Audit Requirements (MAARs). MAARs are minimum audit procedures necessary to comply with generally accepted government auditing standards (GAGAS) when performing incurred cost audits. We thought it would be useful and educational to describe each of the MAARs to help you appreciate why auditors ask what they ask and do what they do.
The MAARs vary greatly in purpose, type of transaction being evaluated, and time frame of accomplishment. MAARs are performed at all major contractors (those with $100 million or more in costs booked to flexibly-priced contracts such as CPFF, CPIF, FPI, and T&M) unless such work would fulfill no useful current or future need or the contractor has no costs claimed in one or more cost elements related to a specific MAAR.
Some MAARs must be performed during the fiscal year under audit. MAAR #6 for example requires auditors to review compliance with timekeeping policies and procedures (i.e. floorchecks). Other MAARs are performed during the incurred cost audit, even if that is several years after the fact. Some are accomplished on a continuous basis.
Currently, there are seventeen MAARs. These requirements are tweaked periodically and some have actually been dropped. At one time there were twenty MAARs.
Over the next few days, we will be describing the purpose and objective of each of the seventeen MAARs. Although, as we mentioned above, they are applicable to "major" contractors, the essence of these audit requirements are performed at non-major contractors as well. So this series should be useful to contractors of all sizes who desire to gain some insight on why auditors do what they do.